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April 26, 2011

The Cash-Only May Challenge

After hearing about the many benefits of paying with cash only, I decided that the month of May will be the opportunity for a new challenge. On May 1, I am going to take out $400 in cash. Anything I do in May such as eating out, entertainment, drinks, desserts, shopping, etc will come out of that cash. When I'm done with it, I'm done with it. That's it.

The reason this is so effective is the physical feeling of "losing" money when you pay in cash. You have a set amount, and when you spend money, you can actually see your amount decreasing. With debit/credit cards, it's very "out of sight out of mind."

This challenge will be similar to my No Spend Saveuary/January. I am not completely eliminating extraneous spending, but I am definitely going to watch every penny so that I don't run out of that $400 before the month is up.

Why am I doing this? I think it will train me to budget even more than I do now. It will also allow me to save for things like my birthday in June, and my trip to Ireland in July.

I'll have to say, paying for everything with cash is one of the worst things you can do. Use a rewards credit card and treat your cards like cash and pay them off in full at the end of the month. Cash rewards cards will give you a percent back on your purchases and other rewards cards will give you points toward travel or whatever. Cards provide a paper trail by their nature so you can track all your purchases. I look at my statements and the end of each month and can clearly see what I've been spending on. Finally many cards offer additional consumer protections, like additional time added to warranties and theft replacement, this can be huge with both small and large electronics type purchases. My credit card will reimburse me for $500 worth of clothing if an airline can't find my bags for 24 hours if I used it to purchase the flight tickets. Cash offers no added value.

This is such a great idea, I need to learn not to lean on my credit card and debit card so often. I'm following you back and looking forward to your updates. I'm thinking about trying this starting in June!!